The role of Chief Compliance Officer can be a difficult one to fill. Not many people join the finance industry to spend their time developing a robust and efficient compliance program, nor do they relish the thought of sifting through the ever-changing rules and regulations set forth by the SEC or the Department of Labor. People don’t want to gain the typical (and may we say, false!) reputation that Compliance Officers have for saying “no”. They may also think they are not naturally inclined to the position because they aren’t strict taskmasters or hyper-detail-oriented.
Here’s a secret: no one is a natural-born Compliance Officer. The key characteristics that make someone successful in the role are learned and developed over time. They are engrained by repetition and diligence. I say this in hopes that Chief Compliance Officers, particularly those who have assumed this position not by choice but by nature of working in a small firm, will not immediately dismiss the idea that they too can possess the behaviors attributable to the most effective Compliance Officers. Instead of reluctantly accepting the duties of your role, look at this challenge as a new opportunity to further develop your professional skillset.
The word “curious” generally refers to a person who shows an eagerness to learn. Often, the process of researching regulations is viewed in a negative light because there’s a feeling that the researcher is looking for something that they do not want to find. If the firm suspects that a regulation may restrict their ability to operate as desired, why would they want to find the regulation to confirm such a thing? Still, a Compliance Officer who has rehearsed the practice of being curious and interested will automatically default to looking for answers when a decision is made, regardless of whether or not those answers create the ideal scenario for the firm’s compliance program.
The importance of this characteristic cannot be overstated. It is extremely difficult to operate if you’re the type of Compliance Officer that procrastinates. Many compliance tasks are to be completed on an ongoing basis, as this is the nature of supervision. If a Compliance Officer allows a monthly task to lapse for multiple months, not only is it more difficult to go back and complete that task, but it eliminates the opportunity for corrections to be made in a timely manner. Similar to the positive habits that drive favorable characteristics, negative habits that drive harmful characteristics are equally habitual. An additional pitfall is a temptation of “backdating.” In layman’s terms, “backdating” in this instance, refers to completing a task, and attempting to assign a date to that task, that reflects that it was completed at some date in the past. This is a highly discouraged practice that, if discovered in a regulatory exam, can severely damage the Compliance Officer’s credibility and negatively impact the audit.
Creative problem solving is a way of solving problems or identifying opportunities when conventional thinking has failed. It encourages you to find fresh perspectives and come up with innovative solutions so that you can formulate a plan to overcome obstacles and reach your goals. Unfortunately, compliance is not as cut and dry as you may think. It’s more of an art than a science. The hardest concept for a Compliance Officer to grasp is the idea that compliance regulations are not designed to specifically address each scenario that will arise. In many cases, regulations are merely designed to prevent historical violations from recurrence, as opposed to being purposed to assist Compliance Officers with future items that may arise. Therefore, using only a logical approach can leave the Compliance Officer in limbo about what decisions to make. Also key to this characteristic is the overlap of compliance topics across various aspects of the firm. In other words, an ADV update may also impact the Advisory Agreement, the Compliance Manual, and a U4 filing. A Marketing or Advertising item may also impact the Social Media Policy. By allowing yourself to be creative, the Compliance Officer can avoid missing something, based on the fact that the original inquiry was too narrowly focused, and failed to consider all items that may be indirectly impacted
Dealing with Regulatory Agencies can be intimidating. There often exists an unwritten, unspoken dichotomy between compliance and convenience, so regulatory agencies can be painted as being in opposition to what’s in a firm’s best interests. In addition, there are many cases in which the exact answer can’t be found in the regulations. It is in these cases, that an effective Compliance Officer will think critically to examine the regulatory circumstances, evaluate risks, and confidently apply their interpretation to the compliance program. When the time comes, the Compliance Officer will also confidently communicate any interpretations and decisions that were made to regulators, as well as employees, clients, and business partners.
The best Chief Compliance Officers are aware of their own limitations and unafraid to ask for help. Especially as a solopreneur or smaller firm, it’s easy to justify the time spent on revenue-driving tasks like sales and marketing. Delivering financial plans and building client relationships are the parts of the job that have immediate and gratifying results. As a result, compliance continues to follow to the bottom of the list, until you can push it off no longer.
It can also feel like a never-ending burden to understand how new regulations may impact your firm's practices, develop and implement strong supervisory processes, and stay up to date on the regulatory deadlines that are triggered when you hire a new employee or move to a new address, as well as when you need to complete quarterly and annual compliance tasks.
A good Chief Compliance Officer knows when to ask for help. Ideally, before they become overwhelmed by their backlog of compliance tasks or the regulators are knocking on the door. There no is shame in admitting you don’t know what you don’t know. There are people who make a whole career in regulatory compliance. Seek out these experts. Tap into their knowledge and leverage their experiences to reinvigorate your confidence in your role and strengthen your compliance program.
For some Chief Compliance Officers, these five characteristics are developed as a natural progression of their professional journey. For others, it can be a bit of a struggle to exercise the habits that lead to the behaviors outlined. If nothing else, simply being aware of the need to perform self-evaluations against these ideas, is the first step to improving performance as a Chief Compliance Officer and finding success in the role.
These materials have not been reviewed or approved by any regulatory agency, and represent solely the interpretative opinions of Synergy Compliance Education (“Synergy”). To the fullest extent permissible pursuant to applicable laws, Synergy disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose. In no event shall Synergy have any liability for damages, losses, and causes of action for accessing these materials.